How to manage brand mergers successfully

By Tom Dougherty

 Brand Mergers Should Make Sense From A Brand Point of View

brand mergersThe business dynamics regulating the market space today mandate that organizations constantly move towards economies of scope and economies of scale. We can’t open the Wall Street Journal, Businessweek, Economist, or any other business publication without seeing a whole host of brand mergers, companies merging, getting bought, or being taken over by another (Facebook buys WhatsApp, the Comcast brand merges with Time Warner brand, the US Airways brand merges with the American Airlines brand —are a few recent examples).

Nearly without exception, executives say the same thing regarding these kinds of activities: “This endeavor will increase our ability to meet the needs of our current and prospective customers by enhancing our ability to deliver a more diverse portfolio of products and services at the best possible price.”

The major problem with this kind of approach is that in most cases, it negates the power of brand equities, positioning, and meaning to a degree on both sides of the equation. A perfect recent example of this is the failed merger between Chrysler and Daimler. While clearly Chrysler did not enter this “merger” from a strong brand position (not unlike any of the other domestic manufacturers), the new DaimlerChrysler was never able to synthesize the two brands into a single cohesive brand that added value from the perspective of the customer.

brand mergersMoreover, the value that was present in Chrysler in 1998 to the tune of $36 Billion was reduced to $7.4 billion only ten years later. The failure of DaimlerChrysler was that Daimler believed that Chrysler and Daimler could be run as separate entities.

The promised “increased ability to meet the needs of our customers” was never realized as Daimler spent too much time and resources protecting the Mercedes brand (what Daimler believed was its core business) and not developing a strategic brand plan to combine the strong points of each brand into a single brand. There were few brand commonalities that could be employed to help bring the two brands together and in the end, the merger was in name only.

A Success in Purpose

brand mergersBrand mergers do not always fail in combining separate brands. Although rare, some organizations have been successful in capitalizing on the individual brand successes and merging those successes into a single brand. A great illustration of this is with FedEx and Kinko’s. At first glance, it may seem unlikely for a company like FedEx to be interested in Kinko’s – that is, of course, until an examination of each brand is done.

FedEx is not in the next day delivery business. At its core, FedEx is in the piece of mind business – piece of mind that your package will get where it is supposed to go when it is supposed to be there. Kinko’s, likewise, is in the piece of mind business. Being open 24 hours with a bevy of business and printing services available, Kinko’s offers its customer’s piece of mind by being there when they are needed most.

FedEx was incredibly smart not to confuse their business processes (next day delivery) with the purpose (piece of mind) of their business. Rather than look for opportunities in alignment with their processes, they explored opportunities in alignments with their purpose. Now Kinko’s is known as FedEx Office strengthening the Kinko’s brand with the addition of the FedEx name and subsequent services while keeping the value of Kinko’s in tact.

Don’t Loose Your Brand

The idea of aligning your brand with the business purpose to ensure you are merging brands successfuly, rather than the process is lost on many organizations today. There are two main reasons for this. First, because it has become so commonplace and accepted (which is totally wrong), many organizations attempt to brand based on a perceived efficacious advantage over a competitor. That is, they try to brand based on their process.

Secondly, the idea of aligning a brand with anything can be scary and daunting to many organizations. It can be daunting because it takes great-prolonged commitment, a clear focus, the ability to look at your organization, marketspace, and customer set dispassionately, as well as the desire and capacity for change. It is scary because change in and of itself is often scary and organizations are hesitant to change what they believe is working for them, even if performance is not meeting expectations.

You Don’t Always Have to Change

Luckily, aligning your brand with your business purpose does not necessarily mean that you have to change what you are currently doing. Remember FedEx? Their business has really always been about piece of mind. In this business “piece of mind” is the highest emotional ground that can be claimed in the package delivery business. Stating so gives the entire organization a rallying cry that synthesizes the process of the business with the beliefs of the target market. It also provides focus for every single business decision that is made within the organization.

brand mergersIn the case of Kinko’s the executives at FedEx may have said: “because we are in the business of providing piece of mind to our customers in everything we do, we are purchasing Kinko’s who, like us, is in the piece of mind business.” While this statement is not completely unlike the more common: “this endeavor will increase our ability to meet the needs of our current and prospective customers by enhancing our ability to deliver a more diverse portfolio of products and services at the best possible price” as stated earlier, the former does provide the key ingredients of focus and clearly states the reason why and it benefit to consumers.

In branding, focus and clarity are your strongest allies, even if it means putting of some of your potential market. Brand, properly executed, should be at the core of the entire organization. It should be the beginning and end of any decision that is made in an organization. Because as your products and services come and go, the only constant is brand.

(Read about name changes in rebranding)